4 Benefits of Buying Residential Property in a Limited Company
Investing in residential property can be a great way to build wealth, generate passive income, and secure a better financial future - it can even make a great pension for you and your family whilst creating a much needed service for tenants looking to rent, There have been numerous restrictions and taxes imposed on landlords in recent years and many investors are remain unaware of the benefits of purchasing and holding a property in a limited company.
Here we will explore the advantages of using a limited company for your next investment..
Tax Benefits
One of the most significant benefits is the potential tax savings. Limited companies are taxed at a lower rate than individuals, and property owners can claim back expenses such as mortgage interest payments, repairs, and maintenance costs against the company's profits. This can result in significant tax savings compared to owning a property in your name. Additionally, when you sell the property, you can benefit from lower capital gains tax rates. Currently, the standard rate for capital gains tax is 28% for individuals, while the rate for limited companies is only 19%. This can result in significant tax savings if you plan to sell the property in the future.
Liability Protection
When you purchase a residential property in your name, you are personally liable for any debts or legal issues that may arise. This can put your personal assets at risk if something goes wrong but if the property is held in a limited company, the company is responsible for any debts or legal issues that may arise. This provides a layer of protection for your personal assets, such as your savings and your own home.
Improved Financing Opportunities
Whilst rates tend to be higher with commercial finance, there are often more flexible financing options. When you apply for a mortgage in your personal name, lenders will assess your personal income and credit score whereas commercial finance will consider the merits of the investment. ie. the rental income versus the repayments etc. This can result in better financing terms and rates, as companies typically have a more stable income and credit history.
Better Succession Planning
Another advantage is improved succession planning in the long run. When you own a property in your name, it can be challenging to pass on the property to your heirs if something happens to you. However, when you own the property in a limited company, or rather the limited company owns the property which you happen to be a director of, it becomes easier to transfer the ownership to your heirs or simply change the directors of that limited company. This can provide peace of mind and ensure that your property is protected for future generations.
It's important to seek professional advice from a solicitor or accountant before making any investment decisions but buying in a company structure can be an excellent way to reduce your tax liability. Be sure that you fully understand the benefits and risks associated with this type of investment and make an informed decision that is right for your circumstances.
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